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Annual CD Sales Slide Resumes; Down 8% for ’05

Posted By Barry Ritholtz On December 30, 2005 @ 7:50 am In Music | Comments Disabled

We’ve broadly discussed [1] the recording industry this year. How’d they do in terms of numbers?

Wsj_music_20051215
After a slight blip up in 2004 [2], CD sales resumed their prior slide. Sales were off 7% (CD albums only) or 8% (CDs and singles). The decrease is comparable to the decline in Movie theater attendance [3], which fell about 7%.

Reported Album sales (January through the week ending
December 25) were 602.2 million in 2005; weaker than last year’s 650.8 million. Digital singles sales more than doubled to 332 million — a 148% increase.

Some blamed the Album CD sales slump on the cherry-picking of singles [4] by a fickle public. But the broader analysis reveals that CDs are a format in decline. While 95% of music sales are still in the CD format, there are plenty of signs this is changing. In addition to the different fortunes of the two formats — CDs are slumping while digitial downloads skyrocket — the industry itself is changing. A new breed of music label is distributing their product strictly in digital format, thereby bypassing CDs entirely [5]. See Cordless Recordings [6] as an example of this.

This year’s biggest sellers, according to Nielsen SoundScan, were Mariah Carey’s Emancipation of Mimi [7] at 4.866 million; In second place was 50 Cent’s The Massacre [8], which sold 4.834 million. "American Idol" winner Kelly Clarkson’s Breakaway [9] finished 3rd, selling 3.4 million copies. The top sales position has not been occupied by a female solo artist since Alanis Morissette’s Jagged Little Pill [10] in 1996. In 2005, female solo artists captured the gold and the bronze.

Although the major labels lament the internet, P2P, and file sharing, it turns out that the Net has been a boon for Indie Labels [11]. Much of the industry’s complaints are actually about disintermediation — the web forces them out of the relationship between the artists and their fans. The indies understand this, and have been using the net to promote their unknown artists.   

While sales here, in the UK sales continue to do better than in the U.S. [12] — despite Great Britain’s widespread adoption of broadband. Credit likely goes to the wider playlists in UK radio, and a payola-free radio industry. Britain does not have the same concentrated private ownership of Radio Stations which have become so prevalent in the U.S. since the 1996 Telecommunications Reform Act [13], which enabled firms like Clearchannel and Infinity to scoop up 1,000s of stations.

Its no coincidence that music sales problems can be traced to what occurred following that legislation’s enactment.

While legal Music downloads more than doubled this year, so too has the recording industry’s misconduct. After settling Price fixing charges [14] in 2002, it appears that the recording industry brain trust is at it again: An industrywide probe [15] into how much record companies charge for digital music [16] was started by NYAG Eliot Spitzer; subpoenas have gone out [17] to several labels.

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One last astonishing piece of music trivia: Mariah Carey’s CD spawned her 17th #1
single, "Don’t Forget About Us." This places her in second place on the
all time #1 hit list — behind the Beatles’ total 20 #1 hits. If Carey
manages to pass the Fab Four [18], I will interpret this as incontrovertible proof that life is meaningless or God is dead . . . I haven’t decided which.

Finally, you can see my Anti-"Best of 2005" here [19].

UPDATE January 3, 2006 6:09am

It turns out that the British are the ‘world’s biggest music buyers [20].’  According to figures released by the British Phonographic Industry (BPI) early 2005, the UK music industry recorded an overall 3% increase in volume sales, mostly due to its robust albums market.

The British buy the most compact discs in the world – an average of 3.2 per year, compared to 2.8 in the US and 2.1 in France.

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Sources:
Silent Night for Music Sales [21]
Holiday Buyers Spurn Tunes As Industry Picture Worsens; ‘Cesspool of Really Bad Bands’
ETHAN SMITH
THE WALL STREET JOURNAL, December 16, 2005; Page B1
http://online.wsj.com/article/SB113469750280524159.html

UK ‘world’s biggest music buyer’
[20]BBC, Tuesday, 22 March, 2005, 12:25 GMT
http://news.bbc.co.uk/1/hi/entertainment/music/4371673.stm

The extensive list of sources used in this posting can be found below [22]


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Mariah Carey Outguns 50 Cent On Year-End LP Sales Chart [23]
Gil Kaufman
MTV, 12.29.2005 12:15 PM EST

http://www.mtv.com/news/articles/1519469/20051229/carey_mariah.jhtml?headlines=true

US CD album sales show 7% slide [24]   
BBC, Thursday, 29 December 2005, 10:00 GMT
http://news.bbc.co.uk/2/hi/entertainment/4566186.stm

Album sales down thanks to customers cherry-picking songs [4]
Anders Bylund
Ars Technica, 12/29/2005 1:26:08 PM,
http://arstechnica.com/news.ars/post/20051229-5864.html

Music label forsakes CDs [5]
Cost-cutting firm’s young fans are online
Associated Press  |  December 27, 2005
http://www.boston.com/business/technology/articles/2005/12/27/music_label_forsakes_cds/

The Net Is a Boon for Indie Labels [11]
JEFF LEEDS
NYT, December 27, 2005
http://tinyurl.com/73mt6

UK Record sales are kept in tune thanks to the over 50s [12]
Newsquest (Herald & Times) Limited
http://www.eveningtimes.co.uk/hi/news/5047369.html

Warner Music Gets Subpoena on Song-Download Pricing [17]
Ian King in San Francisco at  ianking@bloomberg.net.
Bloomberg, December 23, 2005 18:41 EST
http://www.bloomberg.com/apps/news?pid=10000087&sid=aX.AlsxSDnjM&refer=top_world_news

Pricing of Music Downloads Is Probed [15]
Warner Music discloses a subpoena by New York’s Spitzer in an industrywide inquiry.

Charles Duhigg
LA Times, December 24, 2005   
http://www.latimes.com/technology/la-fi-warner24dec24,0,3015790.story


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/12/annual-cd-sales-slide-resumes-down-8-for-05/

URLs in this post:

[1] broadly discussed: http://bigpicture.typepad.com/comments/music/index.html

[2] blip up in 2004: http://bigpicture.typepad.com/comments/2004/12/

[3] Movie theater attendance: http://bigpicture.typepad.com/comments/2005/07/declining_movie.html

[4] cherry-picking of singles: http://arstechnica.com/news.ars/post/20051229-5864.html

[5] bypassing CDs entirely: http://www.boston.com/business/technology/articles/2005/12/27/music_label_forsakes_cds/

[6] Cordless Recordings: http://www.cordless.com/

[7] Emancipation of Mimi: http://www.amazon.com/exec/obidos/ASIN/B0007GAERG/thebigpictu09-20/

[8] The Massacre: http://www.amazon.com/exec/obidos/ASIN/B0007P3582/thebigpictu09-20/

[9] Breakaway: http://www.amazon.com/exec/obidos/ASIN/B00064ADRK/thebigpictu09-20/

[10] Jagged Little Pill: http://www.amazon.com/exec/obidos/ASIN/B000002MY3/thebigpictu09-20/

[11] the Net has been a boon for Indie Labels: http://www.nytimes.com/2005/12/27/arts/music/27musi.html?ex=1293339600&en=7d783101017430f0&ei=5088&partner=rssnyt&emc=rss

[12] better than in the U.S.: http://www.eveningtimes.co.uk/hi/news/5047369.html

[13] 1996 Telecommunications Reform Act: http://www.fcc.gov/telecom.html

[14] Price fixing charges: http://news.bbc.co.uk/2/hi/business/2289224.stm

[15] industrywide probe: http://www.latimes.com/technology/la-fi-warner24dec24,0,3015790.story

[16] charge for digital music: http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20051226&ID=5379102

[17] subpoenas have gone out: http://www.bloomberg.com/apps/news?pid=10000087&sid=aX.AlsxSDnjM&refer=top_world_news

[18] Fab Four: http://www.google.com/search?num=50&hl=en&c2coff=1&client=safari&rls=en&q=The+beatles&spell=1

[19] Anti-"Best of 2005" here: http://bigpicture.typepad.com/comments/2005/12/a_different_kin.html

[20] world’s biggest music buyers: http://news.bbc.co.uk/1/hi/entertainment/music/4371673.stm

[21] Silent Night for Music Sales: http://online.wsj.com/article/SB113469750280524159.html

[22] found below: http://bigpicture.typepad.com/comments/2005/12/down_7_for_05.html#more

[23] Mariah Carey Outguns 50 Cent On Year-End LP Sales Chart: http://www.mtv.com/news/articles/1519469/20051229/carey_mariah.jhtml?headlines=true

[24] US CD album sales show 7% slide: http://news.bbc.co.uk/2/hi/entertainment/4566186.stm

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